Investing in the UK: Miners Leading by Example
The UKs mining sector has been performing well heading into February 2018. Industry giants, Anglo American (1,756.00p), BHP Billiton (1,600.00p), Randgold Resources Ltd (7,168.00p), Rio Tinto (4,024.50p) and others have been leading the way in a short-term resurgence. At the time of writing, the Mining Sector Index & Share Price was up 364.17 points at 19,495.91, or 1.90%.
The FTSE 100 index is currently trading at 7,671.53, with a 0.08% gain, up 5.99 points. Not surprisingly, it was several mining companies that dramatically boosted the performance of an otherwise weak FTSE 100. The strong performers included the following:
- Glencore PLC – 415.00p for a 3.26% change
- Rio Tinto PLC – 4,024.50 for a 2.08% change
- Anglo American – 1,756.00p for a 1.23% change
- BHP Billiton PLC – 1,600.00 for a 1.11% change
While miners performed strongly on the first day of the last week of January 2018, the big fallers included major banking and financial stocks such as:
- Old Mutual PLC – 236.40p for a 1.62% decline
- Standard Chartered PLC – 838.70p for a 1.24% decline
- Barclays PLC – 207.65 for a 1.12% decline
USD Turns Things around on the GBP
Unfortunately, by the close of day, the FTSE was barely 6 points higher. Other factors impacting the UK’s premier all share index include the relatively weak performance of the GBP/USD pair. The cable was down 0.66% at 1.406, from 1.4156 earlier in the day. The cable has been rallying in recent days, thanks to a renewal of confidence in Brexit negotiations, and the UK’s better than expected economic performance data. The 52-week trading range of the cable is 1.2113 on the low end and 1.4340 on the high-end. The final days of January are likely to see sideways movement in GBP trading, as the USD breaks from 5 weeks of lacklustre performance.
The performance of the FTSE 100 index moves in the opposite direction to the strength of the GBP, hence it strengthened marginally on the day. Most of the companies listed on the all share index generate their profits abroad, meaning that they are more likely to be positively affected by a weaker sterling. Commodity prices remain rather stable, but the performance of mining stocks has been boosted by increased demand. Since many commodities are priced in USD, it is likely to put a damper on demand. For example, gold, copper, platinum and crude oil are dollar-denominated commodities and demand tends to fluctuate based on price.
The Release of Chinese Manufacturing Data Could Add Volatility to Commodities Markets
Several commodities have seen market improvements in prices, notably palladium, crude oil, copper, and platinum. The commodity market is likely to be impacted heavily by the release of important economic data from China. As manufacturing data begins to circulate through markets, we could be in for higher levels of volatility in the commodity markets. If Chinese manufacturing data is stronger than forecast, or in line with predictions, this should stabilize commodity prices on the FTSE 100 and the FTSE 250.
However, if Chinese manufacturing data is sub-optimal, this could signal lower demand for commodities and send prices plunging. Towards the close of the day on Monday, January 29 2018, the FTSE 100 index cooled. The vaunted 7,700 barrier remained short-term elusive, but markets were flirting with that level throughout the day.
What are your thoughts on the current state of the financial markets? Is there any long-term merit in commodity prices, or should investors wait for the release of Chinese manufacturing data to determine whether now is the right time to invest in commodities?
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for spreadbettingreview.co.uk.